Avago to buy Broadcom in $37 billion chip deal

Avago, a maker of chips for the wireless and industrial markets, is offering Broadcom shareholders $17 billion in cash and Avago shares valued at $20 billion.

Broadcom had a market value of $28.85 billion as of Tuesday's close, while Avago was valued at $36.50 billion, according to Reuters calculations.

Broadcom's shares rose as much as 23 percent on Wednesday after the Wall Street Journal reported that the companies were in talks. Avago shares rose as much as 10 percent.

Broadcom, based in Irvine, California, makes semiconductors for a variety of products, including set-top boxes, cellphones and network equipment.

The company is best known for its connectivity chips, which integrate Wi-Fi and Bluetooth technology and are used widely in top-tier smartphones made by Apple Inc and Samsung Electronics Co Ltd <005930.KS>.

The combined company, to be based in Singapore, would have annual revenue of $15 billion and an enterprise value of $77 billion, the companies said in a statement on Thursday.

Broadcom shareholders will own about 32 percent of the combined company. They would also have the option to choose between various combinations of cash and stock.

Avago, which is incorporated in Singapore and has dual headquarters there and in San Jose, California, said it intended to fund the cash portion of the deal by using funds from the combined companies and a new debt of $9 billion.

Broadcom shares were up nearly 1 percent at $57.64 in premarket trading, while Avago was unchanged at $141.50.

(Reporting by Supantha Mukherjee in Bengaluru; Editing by Sriraj Kalluvila)